SOS on Oceans from World Bank

There are a number of reasons for the depletion of
fish stocks, including:

A
lack of property rights
over the sea, as ownership is difficult, if not impossible, for
individuals to establish.

There is also
information failure because fishermen do not know the size of available fish stocks.

Externalities are
also associated with fishing, given that fisherman fail to take into
account the impact of their actions on others, including the impact of
over-fishing on other fishermen in the future.

The high fixed cost of boats is also an incentive to fish as
much as possible in order to cover the fixed costs.

Fishermen are often heavily
subsidised, which encourages them to catch more. This happens in
the EU, through the Common Fisheries Policy.

There is also a
Prisoner’s Dilemma,
which means there is an incentive for fishermen to catch as much as they
can because that is what they expect others to do. A prisoner’s dilemma
is any situation where the ‘pay-off’ from an action depends upon
decisions made by other parties. This means that an individual’s
behaviour is influenced by the predictions that they make about how
others will react in response to their behaviour. In this case,
fishermen may predict that all other fishermen will try to catch as much
as they can before the stocks run out. The combined outcome is that
shrinking stocks encourage more fishing and not less! Even if fishermen
agree to limit their catch many will expect others to cheat, hence cheating would become the ‘norm’.

Finally, widespread pollution of the sea has also contributed to the
gradual
depletion of fish stocks.

Remedies

There are a number of possible remedies for reducing the rate of fish
stock depletion, including, attempts to reduce the demand for fish, and
to increase the supply of fish.

Reducing the amount of fishing

.

The quantity of fish caught could be reduced by:

Establishing or extending property rights over
the sea, although this would be difficult to implement and police.

Imposing a special conservation tax on fishing. However, the
effectiveness of such a tax would depend upon the elasticity of demand
for fish.

Introducing a complete or partial ban on fishing. In 2005 the UK
government, implementing EU Common Fisheries Policy, imposed a limit
of 178 days on fishing days for British boats operating in the North
Sea. However, there would be a welfare loss if ‘too little’ fish are
caught, including the loss jobs. An alternative approach might be
get fishermen to sign up to a voluntary ban, though there may be an
incentive to cheat.

Authorities can also reduce the size of fish quotas,
especially for cod, which are at levels close to extinction. In
2005, the EU reduced quotas for cod, herring, and whiting by 15%.

(Source: The Times, December 2005).

Authorities can also legislate to limit the size of nets,
or to increase the size of the mesh – to enable the smaller fish to
escape being caught.

Authorities can also issue special permits to fish,
as a way of controlling the number of fishermen, or fishing days.

Better information for fishermen on the current size of fish stocks, and
estimates for the future.

Reduce or abolish subsidies - in 2002, through its
Common
Fisheries Policy, the EU agreed to stop subsidising boat building - the Common
Fisheries Policy of the EU covers:

Conservation of fish stocks

Creation of a single and organised market for fish, and an external
fisheries policy regarding other countries

Increasing the supply of fish

Reducing demand will lead to a replenishing of fish stocks, but
supply can also be targeted directly, such as by giving subsidies to
fish farmers. However, this would take time, and uses scarce resources
which could be spent elsewhere.

A mixture of the above is likely to be the most
effective in the long run, with the emphasis on a reduction in the
amount of fishing undertaken. The case of fish highlights two basic
strategies for reducing many market failures; either by altering
behaviour by using the price mechanism, or circumventing the price
mechanism and imposing solutions through legislation.

What if too few fish are caught?

If
fishing is over-restricted, there is also a net welfare loss.

The socially optimal level of fishing is at Q1, but restricting output
to Q2, say through a partial ban, would result in lost economic welfare
of EBF.